S&P Global Market Intelligence’s Efraim Levy believes that GM and Ford can outperform Tesla
Tesla Motors Inc. (NASDAQ:TSLA) is one of the few companies which has semi-autonomous vehicles on the roads and arguably the leading player to have state-of-art autonomous driving features. Yet, S&P Global Market Intelligence analyst Efraim Levy believes that the two big automakers – General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) – can overtake the fledgling electric vehicle (EV) maker.
Mr. Levy issued a report Monday forecasting vehicle powertrain electrification to increase over the next 10 years and boost its penetration of the market, which has been dominated by gasoline-driven vehicles for over a century. The auto industry is rapidly changing thanks to Tesla, tech giant Alphabet Inc. (NASDAQ:GOOGL) and ride-hailing service Uber Technologies. The changes are largely driven by consumer and regulatory demands for reduced carbon emission, greater fuel efficiency, and better safety standards.
Despite Tesla and Google’s leading role in the autonomous driving segment, the analyst believes that these conventional automakers, both of whom are more than a 100 years old, will have an edge. First, their manufacturing experiences and sizes make them “the natural producers, buyers and partners of a range of vehicle propulsion systems and technologies.” Second, technological changes are essential to assist carmakers in meeting consumer demand and regulatory requirements.
The research firm highlighted that Ford, the second-largest automaker in the US, invested $182 million in a cloud-based firm, Pivotal, to improve its software capabilities; it plans to transform into an automotive and mobility company. Additionally, it expects to pump $4.5 billion to electrify its vehicles. “We believe Ford’s manufacturing experience and leadership with hybrid vehicles sales and strong balance sheet will help it remain a leader as the industry changes,” Mr. Levy noted.
GM, the largest carmaker in the US, and also the market leader in China, has spent over $2 billion since 2010 to electrify its cars and expects to sell over 500,000 green-energy vehicles by 2017. At the beginning of 2016, the $47.6 billion company also invested $500 million in Uber’s rival, Lyft, and it plans to combine self-diving technology with Cruise Automation, once it acquires it for $1 billion. Moreover, Lyft drivers are potential customers for the Chevy Bolt EV. “We think transactions such as these, combined with our view of GM’s growing electric vehicle skills, position GM to be an important player as the industry evolves,” S&P Global Market Intelligence wrote.
Conversely, Tesla sells only zero-emission vehicles and has gathered a large number of followers. The company plans to grow its annual production 10-fold to 500,000 by 2018, up from 50,000 units it sold in 2015. Additionally, it plans to deliver the Model 3 by next year and the thunderstorm of its reservations shows that the $35,000-vehicle could be a hit. However, Mr. Levy still remains cautious over the stock as he believes it is overpriced.